Trends, sources and amounts of funding for micro enterprises in Latvia

Ilona Beizitere, Anatolijs Prohorovs, Ilona Beizitere


Purpose. The main goal of the article is to identify the trends, sources and amounts of finance for micro enterprises in Latvia.

Methodology. The basic method used for the study is the method of descriptive statistics, as well as surveys and interviews..

Results. The study indicates significant decline in crediting amounts to micro enterprises and reducing the share of financing for micro enterprises in the total portfolio of the banks. In 2014, the number of active micro enterprises in Latvia remained about the same as in 2013. But, calculated per one active micro-enterprise, the credit capacity of banks financing decreased by, an average, approximately 30% in 2014.

A new player, State-owned JSC "Latvian Development Finance Institution Altum", appeared in the financial market at the beginning of 2014. The share of Altum in crediting micro enterprises accounted for 8.4% at the end of 2014. In comparison, the share of venture capital funds in the financing of micro-enterprises accounted for 2.3% in 2014. Should be mentioned that the Business Angel's contribution to the financing of micro-enterprises is not very significant and is less than 1 million Euro in 2014. Similarly, the share of organizations outside the bank financing system and organizations dealing with micro-crediting for Latvian micro companies is very insignificant and accounts for 3 million Euros. In 2014, the total amount of financing micro enterprises accounted for 386.7 million Euros, 88.3% of which was the share of bank lending (excluding the informal investors and the owners of the capital funding shares).

In view of the significant decrease in bank financing for micro enterprises the authors have two recommendations. Firstly, the politicians and government have to build and develop the organization and tools outside the bank financing system for the support and needs of the enterprises.

Secondly, commercial banks should create specific products for micro financing to improve funding for small scale business..

Practical implications The results of the study can be used by politicians, public administration institutions and other bodies responsible for the development and support of micro-enterprises and small businesses. As well, the data presented are interesting for associations of industry such as the Association of Commercial Banks, Venture Capital Association, Association of Business Angels, Chamber of Commerce - and, of course, are binding to researchers of small business..

Keywords: micro enterprises, small business, financing

Paper type: Research paper.


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